Consultants Call For MD Pension System Power
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May 21, 2003 (PLANSPONSOR.com) - If the Maryland
state employee pension board is serious about strengthening
the retirement system's chief executive, it should hand over
some of the board's power to that person.

That was the recommendation by consultant Cortex Applied
Research after a broad evaluation of the pension system’s
structure and board operations, according to The Baltimore
Sun. Among the powers the trustees should consider giving
up, according to the consultants, are the hiring of the
chief investment officer and the selection of money
managers.

Cortex representatives John Por and Tom Iannucci said
the company based its recommendations on the board’s
previously expressed interest in strengthening executive
leadership and making management more accountable. In that
vein, the board needs to stay focused on policy issues
confronting the $24-billion system instead of micromanaging
daily issues, the consultants said.

That suggestion would enhance the authority of Thomas
Lee, the former deputy budget secretary who was hired as
executive director last month. The consultants suggested
that the management structure would balance the increased
power Lee would wield by requiring greater accountability
with performance reviews.

The consultants said the board should leave the hiring
of the system’s chief investment officer to the agency’s
executive director – subject to ratification by trustees.
The investment chief’s position has been vacant since last
month, when the board ousted Carol Boykin.

Lee’s predecessor, Peter Vaughn, took a generally
hands-off approach to the agency’s investment division –
leaving Boykin to report directly to the board’s Investment
Committee or to former pension board Chairman Richard
Dixon.

Vaughn and Boykin were forced out as a result of a
management reshuffle engineered by Comptroller William
Donald Schaefer, who replaced Dixon as chairman early last
year. While Dixon was chairman in 2000 and 2001, the
system’s investment performance fell to the bottom of
national peer group rankings, and the fund lost millions of
dollars to fraud and questionable investments by money
managers, according to the Sun.

The Toronto-based consultants’ suggestion that
trustees leave the selection of money managers to the
staff ran into resistance from trustees. Retired state
police Maj. Morris Krome told the Sun the recommendation
may “fly in the face of fiduciary responsibility.”